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Brazil SR e11

Brazil SR e11

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Trade and regional inTegraTion iniTiaTives

in The americas
From November 28 to December 2, 2005, the Woodrow Wilson Center Brazil Project, now
Brazil Institute and the Congressional Economic Leadership Institute (CELI), sponsored a
U.S. congressional delegation trip to Brazil. The initiative was supported by the Inter-Ameri-
can Development Bank (IDB). The Brazil Information Center (BIC) provided organizational
support and coordination for the trip, which marked the second in a series of exchanges
between Brazilian and U.S. legislators. The delegation traveled to São Paulo, Brasília, and
Rio de Janeiro to discuss issues related to the Doha Round of the World Trade Organization
(WTO) negotiations, to examine bilateral relations between Brazil and the United States,
to participate in a dialogue with Brazilian legislators, and to set the foundation for ongoing
exchanges between U.S. and Brazilian legislators.
The congressional delegation held a series of meetings with business leaders, toured indus-
trial and commercial facilities in key sectors of the Brazilian economy, and met with Brazil-
ian government officials and members of the Brazilian legislature to foment a cross-country
legislative dialogue. The objective of these talks was to help foster mutual understanding and
build a foundation for success at the WTO Ministerial Conference in Hong Kong, which
started less than two weeks later. The trip concluded with a discussion of the challenges Brazil
faces in eradicating poverty, the government’s programs to address inequality, and with visits
to two social programs funded by the IDB designed to help people from the favelas (urban
shantytowns) escape the cycle of poverty and enter mainstream Brazilian society. The del-
egation left with a better sense of the economic, political, and social realities that influence
Brazil’s negotiating position in the trade talks.
mulTilaTeral Trade negoTiaTions
One objective of the delegation’s visit was to examine the key issues involved in the Doha
Round of multilateral trade negotiations. Brazil has emerged as a leader of the group of
Brazil institute special report | september 2006 | issue no. 1

Brazil insTiTuTe special reporT
20 middle-income countries (G20) in these negotia-
tions and, at the Cancun WTO Ministerial in 2003,
led the G20 in strong opposition to the position of the
European Union and the United States. The delega-
tion was intent on securing a firsthand assessment of
Brazil’s negotiating posture in various trade sectors.
Agriculture
To examine agricultural issues, arguably the most divi-
sive issue within the Doha Round, the delegation met
with senior officials at Brazil’s Mercantile and Futures
exchange (BM&F), where they were briefed on mar-
ket operations and safeguards. The BM&F, which
trades in derivatives, exchange rates, and futures con-
tracts for key agricultural commodities, is the world’s
fifth largest futures exchange.
The delegation then participated in a forum on
agriculture trade issues at which Pratini de Moraes,
Brazil’s former agriculture minister, briefed the del-
egation on the status of Brazil’s agricultural sector,
outlook for increased production and exports, and
objectives for increasing trade in agricultural goods
through the Doha negotiations. Antonio Carlos de
Mendes Thame, a member of the Brazilian legislature,
suggested possible ways for the United States and
Brazil to reach agreement in the Doha Round. For-
mer Ambassador to the United States Rubens Bar-
bosa, senior officials from the BM&F, and leaders of
Brazil’s major agriculture companies and exporters
also attended the forum.
Former Minister Pratini de Moraes explained why
Brazil has joined the United States in pressing the
European Union to open its market to international
competition in agricultural products. In a world of
free trade, Brazil sees enhanced opportunities for its
exports of soybeans, sugar, ethanol, beef, and orange
juice. Increased productivity in cattle raising and still
unused land in Brazil could add as much as 200 million
hectares in soy and other crops. He noted that open
markets would allow the United States and Brazil to
continue to compete for world markets in soybeans
and beef, but that the United States must open its own
markets for sugar and concentrated orange juice.
Already a force in world agriculture, Brazil sees
enormous potential ahead. Former Minister Pratini
told the delegation that he envisions the United States
and Brazil as the two agricultural powers that would
“feed the world.” What Brazil lacks, he stressed, is ade-
quate transportation infrastructure to bring its prod-
ucts to market. He also saw enormous potential for
ethanol as a nonpolluting alternative to gasoline.
Services and Manufacturing
The delegation visited two major commercial facili-
ties to examine Brazil’s services and manufacturing
sectors. These visits included meetings with senior
management at which the delegation discussed
how Brazil’s laws and policies both promote and
inhibit business, as well as trade with the United
States and the rest of the world. The delegation also
discussed the services and manufacturing sector
issues currently being negotiated at the WTO and
Six MeMberS of congreSS
participated in the delegation:
• phil english (r-pa), delegation leader;
committee on Ways and Means and Joint
economic committee; co-chair, congres-
sional caucus on brazil
• Michael e. capuano (d-Ma), transporta-
tion, infrastructure, and financial Services
committees;
• dennis cardoza (d-ca), agriculture and
international relations committees;
• Jim costa (d-ca) agriculture, resources,
and Science committees;
• Mike honda (d-ca), Science, transporta-
tion, and infrastructure committees; and
• eddie bernice Johnson (d-tx), Science,
transportation, and infrastructure
committees.
in a world of free trade, Brazil sees enhanced
opportunities for its exports of soybeans,
sugar, ethanol, beef, and orange juice.

Trade and regional inTegraTion iniTiaTives in The americas
the importance of Brazil’s flexibility regarding non-
agricultural market access.
The delegation visited the campus of EDS Brazil
(Electronic Data Systems), located in São Bernardo. It
was clear from the visit that Brazil has already entered
the global competition to provide high quality, low-
cost business services. In addition to serving the grow-
ing services market in Brazil, the EDS facilities are an
integrated component of EDS’s global services net-
work. In this regard, EDS Brazil sees itself as a compet-
itor with India, China, and other ambitious suppliers
of business services: growth has been sufficient to hire
approximately 1,000 new employees a year for the last
several years.
One of the major challenges that EDS faces at its
Brazil operations is to recruit and train a workforce in
Brazil that is capable of meeting its performance stan-
dards. EDS officials explained to the delegation how
it is overcoming the limitations
of Brazil’s educational system by
working with local universities to
help develop a computer science
curriculum that will fit EDS’s
demands. The delegation also dis-
cussed the difficulties presented by
Brazil’s current tax system, which
imposes high taxes on much of
the equipment that EDS imports
for its facilities in Brazil, as well as
on the export of goods and ser-
vices. EDS officials are working
with other multinationals based
in Brazil to provide analyses to
the government on how these tax
policies are a disincentive to busi-
ness investment in Brazil.
The delegation also visited the
main facilities of Embraer, located
in the heart of São Paulo State, and had the oppor-
tunity to examine Brazil’s capabilities in advanced
manufacturing. Embraer is one of four major aircraft
manufacturers in the world today. Many U.S. carriers,
such as American Airlines, United Express, Continen-
tal, US Airways, and Jet Blue, use Embraer aircraft.
At the Embraer facilities, the delegation analyzed
WTO issues related to manufacturing and Brazilian
tax policies that arguably restrict the ability of U.S.
companies to supply and partner with Embraer. The
delegation also discussed Embraer’s recent opening
of an assembly operation plant in Harbin, China, and
the extent to which Embraer was allowing its Chinese
partner access to advanced technology. Regarding
workforce issues, Embraer briefed the delegation on
how it is able to draw much of its engineering talent
from the Institute for Aeronautical Technology, mod-
eled after the Massachusetts Institute of Technology,
which was established by the Brazilian government
in the 1960s as a way to help build and support an
aviation industry within Brazil.
Intellectual Property
The delegation participated in an intellectual prop-
erty (IP) forum sponsored by the American Cham-
ber of Commerce for Brazil. Forum participants
included representatives from the pharmaceutical
industry and major copyright holders, such as the
intellectual property protection…will be
ever more important to Brazil as its econ-
omy becomes increasingly sophisticated
and based upon innovation and technology.
congressman mike honda consulTing wiTh emBraer official

Brazil insTiTuTe special reporT
software and entertainment industries. The panel dis-
cussed a broad range of concerns arising from Brazil’s
failure to properly establish and enforce appropriate
intellectual property protections. Brazil has repeat-
edly threatened to break the patents of American
pharmaceutical manufactures’ HIV/AIDS drugs and
engage in domestic, generic production because of
unaffordable prices. Brazil has also established gov-
ernment price controls and price freezes for pat-
ented drugs that primarily affect the pharmaceutical
research and development industry.
The panel discussed the importance of intellectual
property protection for both the United States and Bra-
zil, stressing that it will be ever more important to Brazil
as its economy becomes increasingly sophisticated and
based upon innovation and technology. The panel also
discussed how Brazil’s own entertainment industry is
damaged by Brazil’s failure to prevent piracy and fraud
and Brazil’s anti-IP stance in such international forums
as the World Intellectual Property Organization.
u.s.-Brazil BilaTeral relaTions
Over the last decade, Brazil has become a more active
participant in global affairs. Brazil is seeking a permanent
seat on the United Nations Security Council, leads a
stabilization mission in Haiti, and has emerged as a leader
in the Southern Hemisphere and among emerging,
middle-income countries. The congressmen traveled
to Brazil less than two weeks after President Bush’s
visit and meeting with Brazilian President Luiz Inácio
Lula da Silva. Brazilian business and government lead-
ers described President Bush’s meeting with President
Lula as positive and productive. Brazil has been both an
ally and an occasional opponent of the United States in
the context of the multilateral trade negotiations. Both
countries cochair the negotiations for a Free Trade
Area of the Americas (FTAA). Progress on an FTAA
agreement is unlikely to be made until the outlines of
a multilateral agreement are first hammered out. Given
the recent Doha Round setback, there might not be a
breakthrough in FTAA negotiations for some time.
Meetings with Brazilian Government Officials
Following its examination of key sectors of the Bra-
zilian economy and the issues in the Doha Round
of the WTO negotiations, the delegation traveled to
Brasília to meet with officials from the Brazilian gov-
ernment and engage in an exchange with members
of the Brazilian legislature.
The delegation met with Minister of Develop-
ment, Trade and Industry Luis Fernando Furlan,
to discuss bilateral trade issues between the United
States and Brazil. At the outset, Minister Furlan told
the delegation that he saw a convergence of the U.S.
and Brazilian negotiating positions on agriculture.
congressional delegaTion
oBjecTives:
1. to examine and discuss issues related to
the doha round of the Wto negotiations
with brazilian government offcials and
legislators prior to the hong Kong Minis-
terial conference.
. to strengthen U.S.-brazil bilateral rela-
tions to better refect brazil’s increasing
global stature.
3. to participate in a dialogue with brazilian
legislators and set the foundation for an
ongoing program of legislative exchanges
between the United States and brazil.
congressmen phil english, dennis cardoza, and
michael capuano aT The minisTry of developmenT

Trade and regional inTegraTion iniTiaTives in The americas
Based on his most recent discussions with Brazil’s
Foreign Relations Minister Celso Amorim, Brazil’s
chief negotiator at the WTO, Furlan argued that it
was a question of when – not whether – an agree-
ment would be reached for the phaseout of export
subsidies for agricultural crops. He linked agricultural
trade to employment in the developing world and
suggested that increased opportunities for agricultural
trade might be a realistic way to stem the flow of
immigrants to the industrial world.
One key point in the discussion involved the need
for Brazil and the G20 countries to be more flex-
ible with respect to manufacturing and services. The
delegation suggested that, in order to make progress
in the WTO negotiations, it would be important for
Brazil to make clear its willingness to
move in these areas. Shortly after the
delegation returned to the United
States, Brazil publicly announced
greater negotiating flexibility in ser-
vices and manufacturing.
Furlan pointed to improved
laws, regulations, and enforcement
when the delegation raised concern
about Brazil’s enforcement of laws
protecting intellectual property. The delegation coun-
tered by noting that limitations on smuggling were
weak – particularly along the southern border where
Argentina, Brazil, and Paraguay meet. Minister Furlan
reported that the government is making headway in
limiting the gray market by reducing taxes and hence
the incentives to smuggle certain items.
The delegation also examined Brazil’s growing use
of alternative fuels – particularly ethanol. Sixty per-
cent of new cars sold in Brazil are “flex fuel vehicles”
that can run on any mix of ethanol and conventional
gasoline. Embraer also produces an award-winning
ethanol-fueled crop-dusting aircraft. The economics
of ethanol are changing in Brazil, in large part because
genetic engineering has created sugar cane plants that
continuously yield sugar for seven years.
The delegation then discussed concerns related to
foreign investment in Brazil and suggested that a tax
treaty between the United States and Brazil could be
a sure way to increase foreign direct investment.
legislaTive exchange
Another objective for the congressmen’s visit to
Brazil was to participate in a legislative dialogue
with their Brazilian counterparts. This exchange
began with an opening dinner that provided an
opportunity for delegation members to meet and
engage in informal discussions with Brazilian leg-
islators. Although more than twenty legislators had
confirmed their attendance, many were unable to do
so because it coincided with the House of Delegates
vote on an action to expel a legislator from his seat
over corruption charges.
The formal program of the legislative dialogue
began when the U.S. delegation met with Aldo
Rebelo, the President of the Brazilian Chamber of
Deputies. He formally welcomed the delegation to
Brazil and noted how the U.S. history and struggle
for independence had provided inspiration for Brazil.
He told the delegation that an early martyr in Brazil’s
struggle for independence had a copy of the Declara-
tion of Independence in his pocket.
Another legislative dialogue took place with
the Chamber of Deputies’ Committee on Foreign
sixty percent of new cars sold in Brazil are “fex fuel
vehicles” that can run on any mix of ethanol and
conventional gasoline.
congresswoman eddie Bernice johnson addressing depuTy aldo reBelo

Brazil insTiTuTe special reporT
Relations. Although not a formal session of the com-
mittee, it was authorized and conducted pursuant to
a resolution adopted by the committee. The dialogue
was jointly chaired by Deputy Aroldo Cedraz, Chair-
man of the Foreign Relations Committee, and Con-
gressman Phil English, leader of the U.S. delegation.
The legislative dialogue was also cochaired by Deputy
Luiz Carlos Hauly, who had played a major role in
organizing the Brazilian legislators’ participation in
the program, and Nilson Mourão, the Vice-Chairman
of the Foreign Relations Committee.
After introductory statements, the floor was
opened for discussion on a broad range of topics,
which included the current state of and U.S. eco-
nomic and political developments, the U.S.-Brazil
bilateral relationship, and issues and concerns related
to the WTO trade negotiations and other multi-
lateral organizations and agreements. Specific issues
discussed included global warming and the U.S.
refusal to sign the Kyoto Protocol, the war in Iraq,
the potential benefits to the United States and Bra-
zil of increased trade, and opportunities to reduce
the flow of illegal immigration from Brazil and the
rest of Latin America to the United States through
increased economic growth. U.S. and Brazilian leg-
islators also discussed Brazil’s interest in encourag-
ing the developed world to abandon agricultural
subsidies, the importance to Brazil and the other
G-20 countries of demonstrating their willingness
to make concessions in the services and manufac-
turing negotiations, and the need to preserve and
improve intellectual property protections in the
current round of discussions. The dialogue con-
cluded with comments from both sides regarding
the value of continued communication between
legislators from both nations and the mutual inter-
est in continuing this dialogue. The Brazilians also
suggested having the U.S. legislators participate in
other exchanges involving legislators from else-
where in Latin America.
The legislative dialogue concluded with a lunch
hosted by the President of the House of Deputies
for the U.S. Members of Congress and senior mem-
bers of the Brazilian House of Deputies. In addition
to trade and the economy, the delegation exchanged
information on how their respective congresses dealt
with legislation, oversight, and elections. The delega-
tion and their Brazilian counterparts urged an ongo-
ing dialogue between the two congresses.
programs To address poverTy in Brazil
The delegation concluded its visit to Brazil by traveling
to Rio de Janeiro to examine issues related to poverty,
and in particular the favelas that are home to Brazil’s
poorest citizens. These informal, irregular establishments
built into the hillsides lack running water, sanitary sewer-
age, and other services and utilities, including paved road
access to the rest of the city. Favela residents are trapped
in a cycle of poverty through lack of government ser-
vices, rampant crime, and the stigma of poverty itself.
The delegations toured several favelas to examine the
progress that has been achieved through Favela-Bairro,
a massive social program initiated by the Municipality
of Rio de Janeiro in 1993 that has received almost $1
billion in funding from the IDB. Rather than remov-
ing inhabitants from the favelas to formal housing proj-
ects, the Favela-Bairro program seeks to bring social
and infrastructure services into the favelas in a manner
that helps create real neighborhoods and opportunities
for the residents of these communities. City officials
parTicipaTing Brazilian
depuTies:
• aldo rebelo – pcdob/Sp
• andré costa - pdt/rJ
• antonio carlos de Mendes thame -
pSdb/Sp
• antônio carlos pannunzio - pSdb/Sp
• aroldo cedraz - pfl/ba
• coubert Martins - ppS/ba
• edson ezequiel - pMdb/rJ
• Julio delgado - pSb/Mg
• luiz carlos hauly - pSdb/pr
• Maninha - pSol/df
• nelson Marquezeli - ptb/Sp
• nilson Mourão - pt/ac
• paes landim - ptb/pi
• Socorro gomes - pcdob/pa

Trade and regional inTegraTion iniTiaTives in The americas
described the significant progress that has been made
and the benefits that have been achieved for the more
than 600,000 favela residents. In addition to basic infra-
structure, this program has also provided residents with
an address, an overlooked necessity that is often a pre-
requisite to obtaining credit and other services essential
to escape from poverty.
ThoughTs for The fuTure
The delegation traveled to Brazil a few weeks prior
to the Hong Kong Ministerial of the WTO. This
timing was intended to provide the delegation an
opportunity to learn firsthand about the Brazilian
economy, to understand the rational behind Brazil’s
pressure to end agricultural subsidies, and to deliver
a strong message on the need for Brazil to show
flexibility in opening its market to services and man-
ufactures and to sharply improve its protection of
intellectual property.
The delegation left with a better sense of the eco-
nomic and political realities that influenced Brazil’s
negotiating position in the multilateral trade talks.
They had a much deeper sense of Brazil’s enormous
agricultural potential and the possibility that etha-
nol may be a factor in fueling the future growth
of both the United States and Brazil: two large,
vibrant democracies that share common values and
histories. The delegation had the opportunity to par-
ticipate in a valuable exchange with legislators from
the Brazilian Congress. Broadening and deepening
these legislative exchanges will strengthen the bilat-
eral relationship and lead to better understanding
between the two countries. On May 17, Speaker of
the House Aldo Rebelo traveled to Washington, DC,
with Deputies Luiz Carlos Hauly and Jorge Bittar
to continue the ongoing exchange by meeting with
Phil English and other U.S. congressmen.
The visit also highlighted the enormous contrasts in
Brazil. On the one hand, Brazil has an agriculture sector
that is a force in world markets, sophisticated 21st-cen-
tury businesses, and bustling cities. On the other hand,
within Brazil’s cities are the sprawling favelas that are
home to as much as one-fifth of the population and
the country’s transportation infrastructure
is barely able to handle the current level
of trade and commerce, much less the sig-
nificant growth in economic activity that
Brazil’s business and government leaders
say is just around the corner.
What is perhaps most evident from the
delegation’s visit is the importance of Bra-
zil within South America, the hemisphere,
and increasingly, the world. Having learned
more about Brazil, the delegation was even
more aware of how little attention Brazil
receives in the American media and from policymak-
ers within the United States. A better understanding
of Brazil’s economic perspective is essential, given
recent bottlenecks in Doha Round negotiations and
increasing bouts over trade. Brazil will be one of the
global powers of the 21st century and Americans need
to know more about its economy, history, politics, and
culture, if the bilateral relation is to remain strong.
a better understanding of Brazil’s economic
perspective is essential, given recent bottlenecks
in doha round negotiations and increasing bouts
over trade.
congressmen dennis cardoza, michael capuano, and
jim cosTa aT The commiTTee on foreign relaTions
Brazil insTiTuTe
the brazil institute of the Woodrow Wilson center was created out of the con-
viction that brazil and the U.S.-brazilian relationship deserve greater attention
within the Washington policy community. brazil’s population, size, and economy,
as well as its unique position as a regional leader and global player, justify this
attention. in keeping with the center’s mission to bridge the worlds of scholarship
and policymaking, the brazil institute sponsors activities on a broad range of key
policy issues designed to create a brazil “presence” in Washington.
for more information about the brazil institute, please visit
www.wilsoncenter.org/brazil or write to brazil@wilsoncenter.org
woodrow wilson inTernaTional cenTer for scholars
lee h. hamilton, president and director
Board of TrusTees
Joseph b. gildenhorn, chair
david a. Metzner, Vice chair
pUblic MeMberS: James h. billington, librarian of congress; allen Weinstein,
archivist of the United States; bruce cole, chair, national endowment for the
humanities; Michael o. leavitt, Secretary, U.S. department of health and human
Services; condoleezza rice, Secretary, U.S. department of State; lawrence M.
Small, Secretary, Smithsonian institution; Margaret Spellings, Secretary, U.S.
department of education. designated appointee of the president from Within the
federal government: tamala l. longaberger. priVate citizen MeMberS: carol
cartwright, robin b. cook, donald e. garcia, bruce S. gelb, Sander r. gerber, charles
l. glazer, ignacio Sanchez
The Brazil insTiTuTe
Woodrow Wilson international center for Scholars
one Woodrow Wilson plaza
1300 pennsylvania avenue, nW
Washington, d.c. 000-307
tel: 0-91-087
fax: 0-91-07
brazil@wilsoncenter.org
www.wilsoncenter.org/brazil
cover phoTos:
© alex parlini
© iStockphoto
© philip coblentz
interior photos courtesy of celi

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